Consultation: Proposed Revisions to ISA (UK) 250 Section A – Consideration of Laws and Regulations in an Audit of Financial Statements

13 Mar 2017

The Financial Reporting Council (FRC) has today launched a consultation on proposed revisions to ISA (UK) 250, and conforming amendments to other UK standards. The consultation runs until 26 May 2017.

The revisions, which are limited in scope, reflect changes made to the International Code of Ethics[1] issued by the International Ethics Standards Board for Accountants (IESBA). These changes provide a framework to support reporting by accountants where they identify non-compliance with laws or regulations in the course of their work.

The International Auditing and Assurance Standards Board (IAASB) made minor changes to align ISA 250 with the requirements of the revised Code. We now propose to make these changes into ISAs (UK).

The proposed changes help to improve the clarity of the ISA (UK), for example, the definition of non-compliance has been amended to cover a broader range of instances that are contrary to the prevailing laws or regulations. This is supported by application material on laws and regulations that deal with fraud, corruption and bribery and money laundering, terrorist financing and proceeds of crime.

In the consultation, the FRC has also asked a question about how material to support auditors in understanding their responsibilities in UK law where they identify, or have reasonable grounds for suspicion of money laundering, should be updated.

The government is working to adopt the 4th Anti-Money Laundering Directive, and the FRC has asked whether material should be included in an updated Practice Note 12, or whether the material should be incorporated in a new appendix to ISA (UK) 250.

[1] Auditors in the UK must comply with the FRC Ethical Standard. Professional accountants in the UK use the Code of Ethics adopted and issued by their respective professional body, which complies with the requirements of the IESBA Code.